Subgame perfect manipulation of children by overlapping generations of agents with two-sided altruism and endogenous fertility
AbstractIn this paper we consider an overlapping generations model with endogenous fertility and two-sided altruism and show the limitations of applying commonly used open loop Nash equilibrium in characterizing equilibrium transfers from parents to children in the form of bequest, and transfers from children to parents as voluntary old-age support. Since in our model children are concerned with parents' old-age consumption, agents have incentives to save less for old age and to have more children so as to strategically induce their children to transfer more old-age support. We formulate such strategic behavior within a sequential multi-stage game and use the notion of subgame perfect equilibrium to study the consequences of such strategic manipulations on private intergenerational transfers, fertility and savings decisions, and on Pareto optimality of equilibrium allocation. We then examine the role of social security to correct such strategic distortions.
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Bibliographic InfoPaper provided by EconWPA in its series Labor and Demography with number 9604003.
Length: 16 pages
Date of creation: 05 Apr 1996
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two-sided altruism; endogenous fertility; subgame perfect manipulation of children; social security;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
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